Industry Evidence on the Effects of Government Spending

Christopher Nekarda and Valerie Ramey

American Economic Journal: Macroeconomics, 2011, vol. 3, issue 1, 36-59

Abstract: This paper investigates the effects of government purchases at the industry level in order to shed light on the transmission mechanism for government spending on the aggregate economy. We create a new panel dataset that matches output and labor variables to industry-specific shifts in government demand. An increase in government demand raises output and hours, lowers real product wages and labor productivity, and has no effect on the markup. The estimates also imply approximately constant returns to scale. The findings are more consistent with the effects of government spending in the neoclassical model than the textbook New Keynesian model. (JEL E12, E23, E62, H50)

JEL-codes: E12 E23 E62 H50 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mac.3.1.36
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Citations: View citations in EconPapers (72)

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Related works:
Working Paper: Industry evidence on the effects of government spending (2010)
Working Paper: Industry Evidence on the Effects of Government Spending (2010)
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